Customers at Northern Rock will be informed in January whether their mortgage will be held by the ?good bank? or the ?bad bank? when the split of the bank comes on 1 January 2010. Mortgage customers do not need to do anything, but they will be informed by letter about where their mortgage will be managed.
To support the move, the UK government loan to Northern Rock will increase by another ?8 billion, with the split being a step on the road to a partial sale ? a move which was approved by the EU in October.
The so-called ?good bank? will be called Northern Rock plc, and will hold all savings accounts, offer new lending and hold ?10 billion of existing mortgages. The other part ? the ?bad bank? ? will be called Northern Rock (Asset Management) and will hold most of the mortgages ? around ?50 billion ? and will repay the government loans.
BBC News has reported that the good bank will be sold to a third party, but the bad bank will be retained by the government. Its assets will be gradually run down and the institution will eventually be liquidated.
Northern Rock chief executive Gary Hoffman said: ?We want this to be a seamless process for our customers and they do not need to take any action. We will be writing to them in early January confirming which company holds their account ? but we have already confirmed that all savings accounts will be in the new bank.?
?I am pleased with the progress to date, and all of the hard work colleagues are doing behind the scenes to ensure this is a smooth process for customers.?
